Ch. 8 Government and Not for Profit Accounting Exam 2

The following balances exist at year end within the governmental activities of a government unit: Transfers In: 150,000 Transfers Out: 120,000 When compiling the government wide financial statements, the journal entry to eliminate the transfer activity will include:

A. A debt of 120,000 to Transfers In

Which of the following would be considered a program revenue in the Statement of Activities of a local government?

A. A grant from the state to construct a utility plant.

Which of the following is true regarding revenue recognition for property taxes, when reporting in the government - wide statements?

A. Assets are recognized when an enforceable legal claim has arisen or when resources are received, whichever is first

When making the worksheet entry to eliminate transfers which of the following would be acceptable considering transfers in of $240,000 and transfers out of $420,000?

A. Dr. Transfers In from other funds 240,000 Cr. Transfers Out to other funds 240,000

The governmental funds report a total of $2,000,000 Transfers In and $1,500,000 Transfers Out. To consolidate governmental activities what amount will be eliminated from Transfers In and Transfers Out accounts?

A. $1,500,000

The City of Smithfield levied property taxes in and for 2012 in the amount of 200 million. It is estimated that 1% will be noncollectable. During 2012, 180 million was collected, and 12 million was collected during the next 60 days. Smithfield recognizes the maximum possible property taxes in its governmental funds. The adjustment, when moving from the governmental funds changes in fund balances to the governmental activities change in net assets would be.:

A. $6 million increase

A government reported the following transfers in its governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balance: (1) transfer from the General Fund to a special revenue fund in the amount of 400,000 (2) transfer from the General Fund to an internal service fund int he amount of 300,000 (3) a transfer from the general fund to a permanent fund int he amount of 200,000. The amount that would be shown as a transfer out int he governmental activities column int he Statement of Activities would be:

A. 0. no transfer would be shown

A local government issued bonds and recorded the event by debiting cash and crediting Other Financing Source - Proceeds of Bonds and Other Financing Source - Premium on Bonds. What is the worksheet entry when preparing the government wide statements?

A. Debit Other Financing Sources - Proceeds of Bonds and Other Financing Sources - Premium on bonds and Credit Bonds Payable and Premium on Bonds.

A local government purchased a building and recorded the event by debiting Expenditures - Capital Outlay and crediting cash. What would be the worksheet entry to prepare the government wide statements?

A. Debit to Capital Assets and credit to Expenditures - Capital Outlay

A governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances reported expenditures of $30 million, including capital outlay expenditures of $5 million. Capital Assets for that government cost $90 million, including land of $10 million. Depreciable assets are amortized over 20 years on average. The reconciliation from governmental changes in fund balances to governmental activities changes in net assets would reflect a (an):

A. Decrease of $1 million

Which of the following is a purpose of the worksheet to convert from fund financial records to government wide financial statements?

A. Eliminate expenditures for capital assets

Which of the following is true regarding the government - wide Statement of Activities?

A. Fiduciary activities are not reported

Which of the following is true regarding the reporting of general fixed assets by state and local governments?

A. Fixed assets are reported in the government wide statements of Net Assets

Internal service funds are most commonly reported in which section of the Government wide financial statements:

A. Governmental Activities

A governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances reported expenditures for capital outlay in the amount of 5,000,000. Capital assets for that government cost 110,000,000 including 15,000,000 in land. Depreciable assets are amortized over 20 years on average. The reconciliation from the governmental funds changes in fund balance tot he governmental activities change in net assets would reflect a (an):

A. Increase of 250,000

A governments Statement of of Revenues, Expenditures, and Changes in Fund Balances reported proceeds of bonds in the amount of 500,000. It also reported expenditures for bond principal int he amount of 1,000,000. The last interest payment was on the last day of the fiscal year. The reconciliation from the governmental fund changes in fund balances to the governmental activites change in net assets would reflect an:

A. Increase of 500,000

The governmental funds follow ______ where the government - wide statements follow __________.

A. Modified accrual accounting, accrual accounting

The difference between assets and liabilities in the government - wide statements is called ________?

A. Net Assets

Which of the following funds would not be included int he government - wide statements:

A. Pension Trust Fund

When converting from fund basis reporting to government - wide reporting, which of the following would require an adjustment?

A. Property taxes expected to be collected 90 days after the end of the fiscal year.

Which of the following are government - wide statements?

A. Statement of Net Assets

The General Fund of the City of Plymouth purchased a police car in the amount of $25,000. Which of the following would be true?

A. The General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances would report an expenditure of $25,000.

Which of the following is true regarding worksheet entries?

A. Worksheet entries are not posted to the general ledger ( they are not booked )

Which of the following statements is not correct?

A. Worksheet entries are posted to the GL when preparing the government wide statement and then reversed at the beginning of the next fiscal year.

When preparing government wide financial statements the modified accrual based governmental funds are adjusted for all of the following events except?

B. Change in current assets and current liabilities from year to year

In its Statement of Net Assets, a government reported: - assets of $90 million, including $30 million in capital assets (net) and - liabilities of $50 million, including long-term debt of $15 million, all related to capital asset acquisition. The government also reported $10 million of net assets were restricted for payment of debt service. The government's unrestricted net assets would be reported as:

B. $15 million

The City of Charlestown levied property taxes in the amount of $9,000,000. It is estimated that 2% will not be collected. The taxes were levied July 1, 2011 for the fiscal year ended June 30, 2012. During the year ended June 30, 2012 $7,900,000 in property taxes were collected. It is estimated that $300,000 will be collected during the next 60 days, $620,000 will be collected more than 60 days after June 30, 2012, and $180,000 will never be collected. When preparing government - wide financial statements , how much property tax revenue should be recognized for the year ended June 30, 2012?

B. $8,820,000

The City of Kale levied property taxes in the amount of $10,000,000 for the fiscal year ended December 31, 2012. It is estimated that 3% will not be collected. During the year ended December 31, 2012, $8,900,000 in property taxes were collected. It is estimated that $500,000 would be collected during the next 60 days, $200,000 would be collected ruing the remainder of 2013 and, $100,000 would be collected in 2014, and $300,000 would not be collected. Kale has a policy of recognizing the maximum possible in property taxes. What amount of property taxes tax revenue would be reported it its General Fund Statement of Revenues, Expenditures, an Changes in Fund Balances for the year ended December 31, 2012?

B. $9,400,000

A government had the following transfers reported in its governmental funds Statement of Revenues, Expenditures, and Changes in Fund balances: (1) A transfer from the General fund to a debt service fund in the amount of $1,100,000 (2) a transfer from the General fund to an enterprise fund in the amount of $1,300,000 and (3) a transfer from the General fund to an internal service fund in the amount of $500,000/ The amount that would be shown as a transfer out in the governmental activities column in the Statement of Activities would be:

B. 1,300,000

A government reported, in its government- wide Statement of Net Assets: Assets of $80 million, including $40 million in capital assets (cost), with $12 million in accumulated depreciation and Liabilities of $50 million, including long term debt of $15 million all related to capital asset acquisition In addition $4 million of cash was restricted for payment of debt service . The government's unrestricted net assets would be reported as:

B. 13 million

A governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances reported expenditures of 40 million including capital outlay expenditures of 11 million. Capital assets for that government cost 80million including lad in the amount of 10 million. Depreciable assets are maoritized over 10 years on average. The reconciliation from governmental fund changes in fund balances to governmental activities change in net assets would reflect a(an):

B. 4 million increase

Under which of the following circumstances would an asset be considered impaired?

B. A bridge is damaged by an earthquake

On April 1, 2012 a local government issued bonds int he amount of $1,500,000. The bonds were issued at par and carried and interest rate of 5% payable Oct 1 and April 1. When moving from the change in fund balances in the governmental funds Statement of Revenues, Expenditures, and Changes in Fund balances to the change in net Assets int eh governmental funds column of the Statement of Activities, both for the fiscal year ended June 30, 2012, the effect for the interest accrual only would be:

B. A decrease of $18,750

A government reported an other financing source in the amount of 900,000 related to the sale of land it its governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances. The land had a cost of 340,000. The amount that would be reported in the government - wide Statement of Activities would be:

B. A gain f $560,000

Which of the following is true concerning infrastructure assets?

B. Capitalization of infrastructure is required

A local government recorded the payment of bond principal by debiting Expenditure: Bond principal and crediting cash. What is the worksheet entry when preparing the government - wide statements?

B. Debit Bonds Payable and credit Expenditure : Bond Principal

What would be the appropriate journal entry to adjust to the accrual basis of accounting for depreciation in prior years?

B. Debit Net Assets, Credit Accumulated Depreciation

A donated collection is not required to be capitalized. If a government decides not to capitalize then, how will they be accounted for at the time of the donation?

B. Debit expense/expenditure, credit revenue

When converting to government - wide financial statements, the entry to record the amortization of the premium on a bond would look like:

B. Debit the Premium on bonds payable and credit interest expense.

The total amount of indebtedness of specified kinds that is allowed by law to be outstanding at any time is known as:

B. Debt Limit

The difference between the amount of debt limit calculated as prescribed by law and the net amount of outstanding indebtedness subject to limitation, is known as:

B. Debt Margin

A government reported an other financing source int he amount of 600,000 related to the sale of land in its governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances. The land had a cost of $150,000. The adjustment in the reconciliation when moving from the changes in fund balances in the Statement of Revenues, Expenditures, and Changes in Fund Balances to the change in net assets int he Statement of Activities would be:

B. Decrease of $150,000

When using the modified approach to account for infrastructures, expenditures to extend the life of the infrastructure assets are:

B. Expensed

Which respect to government wide statement, which of the following statements is correct?

B. GASB Statement No. 34 states that general capital assets should not be reported as assets in governmental funds but should be reported in the governmental activities column of the government - wide statement of net assets.

Which of the following is false regarding government - wide statements?

B. General fixed assets are not required to be reported on the government - wide balance sheet

Which of the following is true regarding the government-wide financial statements?

B. Government - wide statements are prepared using the economic resources measurement focus and accrual basis of accounting

Which of the following is not true regarding infrastructure assets?

B. Infrastructure assets are never depreciated

Which of the following would not need to be addressed/adjusted in compiling the government - wide statements?

B. Principal repayment on proprietary funded bonds.

Which of the following is considered a source of general revenue in the Government - wide Statement of Activities?

B. Sales Taxes

Which of the following is true regarding the government - wide Statement of Net Activities?

B. The accrual basis of accounting is used to calculate revenues and expenses

A governments Statement of Revenues Expenditures and Changes in Fund Balances reflect proceeds of bonds in the amount of 1,000,000. That statement also reflected expenditures for debt service in the amount of $3,000,000 including 2,600,000 for principal payments. Assuming no other changes, the effect when moving from the change in fund balances in the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the change in net assets for governmental activities in the Statement of Activities would be a:

C. $1,600,000 increase.

The City of Charlestown levied property taxes in the amount of $9,000,000. It is estimated that 2% will not be collected. The taxes were levied July 1, 2011 for the fiscal year ended June 30, 2012. During the year ended June 30, 2012 $7,900,000 in property taxes were collected. It is estimated that $300,000 will be collected during the next 60 days, $620,000 will be collected more than 60 days after June 30, 2012, and $180,000 will never be collected. When preparing the General Fund financial statements, how much property tax revenue should be recognized for the year ended June 30, 2012?

C. $8,200,000

Which of the following would not be determined to result in asset impairment under GASB Statement 42?

C. A truck is at the end of its useful life

The City of Charlotte levied property taxes in 2012 in the amount of $10 million. It is estimated that 2% will be noncollectable. During 2012, 9,000,000 was collected and it is anticipated that 400,000 will be collected during the next 60 days. When moving from the changes in fund balances int he Statement of Revenues Expenditures, and Changes in Fund Balances to the changes in net assets in the Statement of Activities what will be the adjustment?

C. An increase of $400,000

The reconciliation (s) that are required to be presented on the face of the governmental fund financial statements or in separate schedule immediately after the fund financial statements include:

C. Both A & B A. Reconciliation from the governmental fund Balance Sheet to the Statement of Net Assets B. Reconciliation from the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balance to the Statement of Activities

The City of Casper levied property taxes for 2012 int he amount of 8,000,000. The amount estimated to be uncollected is 3%. By the end of the year 7,300,000 had been collected. It was estimated that 400,000 would be collected during the next 6o days of 2011 and that 240,000 would be collected after that. The City has a policy of recognizing the full amount possible for property taxes. Which of the following statements is true?

C. Both A and B A. The amount reported for property tax revenue in the government - side Statement of Activities would be 7,660,000 B. The amount reported for property tax revenue in the governmental fund Statement of of Revenues, Expenditures, and Changes in Fund Balances would be 7,700,000

Which of the following is true regarding the government - wide Statement of Net Assets?

C. Both of the above Discretely presented component units are reported separately. Governmental and business -type activities are reported separately and are consolidated within columns.

Which of the following is true regarding revenue recognition for sales taxes, when reporting in the government - wide statements?

C. Both of the above are true. Assets are recognized when the underlying exchange has occurred or when resources are received, whichever occurs first Revenues are recognized when the underlying exchanged has occurred

Which of the following adjustments would be made when moving from the governmental funds balance sheet to the governmental activities column in the government - wide Statement of Net Assets?

C. Both of the above. Add balances of internal service funds Add fixed assets, net depreciation

Which of the following is true regarding the government wide statements?

C. Both of the above. Balances from enterprise fund statements are entered directly to the business type Government wide statements are consolidated within columns.

A local government recorded the sale of a capital asset by recording a debit to cash and credit to proceeds of sale of capital asset. What is the worksheet entry when preparing the government wide statements?

C. Debit to Proceeds of sale of capital assets and credit to capital asset (net) and gain/loss on sale of capital asset

Which of the following is false about the worksheet entry process?

C. Entries are not necessary for the beginning balance of long -term assets since they were entered last year

Which of the following is not a reconciliation required by GASB?

C. From enterprise fund balance sheet to the Government - wide Statement of Net Assets

Where in the basic financial statements would one find fiduciary activities reported?

C. In the fiduciary fund statements only

Which of the following would be included in the Equity section of the Statement of Net Assets?

C. Invested in capital assets, net of related debt

Governmental fund - basis statements are prepared using the _______, and must be converted to the __________ to be incorporated in the government - wide statements.

C. Modified accrual basis, accrual basis

Which of the following situations would probably not result in an asset impairment?

C. Ridership on city buses declines

Which of the following statement is not correct with respect to the preparation of government - wide statements?

C. Worksheet entries must be made to eliminate operating profits earned by enterprise funds.

The City of Kale levied property taxes in the amount of $10,000,000 for the fiscal year ended December 31, 2012. It is estimated that 3% will not be collected. During the year ended December 31, 2012, $8,900,000 in property taxes were collected. It is estimated that $500,000 would be collected during the next 60 days, $200,000 would be collected ruing the remainder of 2013 and, $100,000 would be collected in 2014, and $300,000 would not be collected. Kale has a policy of recognizing the maximum possible in property taxes. What amount would be reported in the government - wide Statement of Activities for the year ended December 31, 2012?

D. $9,700,000

A government recorded transfers out of the General fund to the debt service fund in the amount of 600,000 and to the capital projects fund in the amount of 300,000. The amount that would be shown as a transfer in the governmental activities column of the Statement of Activities would be:

D. 0

A government's Statement of Revenues, Expenditures, and Changes in Fund Balances reflected expenditures for debt service int he amount of 12,000,000 including 5,000,000 for principal. It also reflected proceeds of bonds int he amount of 4,000,000 . No interest accruals were involved. When moving from the changes in fund balances reported for the governmental funds to the change in net assets for governmental activities, the net change would be:

D. 1,000,000 Increase

In its government - wide Statement of Net Assets, a government reported assets of 150 million, including 50 million in capital assets ( net of depreciation ) and liabilities of 80 million including long term debt of 60 million 40 million of which was issued to acquire capital assets. In addition, 30 million was restricted for debt service and other purposes . The governments unrestricted net assets would be reported as:

D. 30 million

A government incurred expenses for its infrastructure as follows: 20 million for general repairs 15 million to extend the life for existing infrastructure 18 million for additions and improvements The government chooses to use the modified approach to record infrastructure. The infrastructure has a basis of 400 million and would be depreciated over a 40 year life, if depreciation were charged. The amount that would be shown as expenses in the Statement of Activities would be:

D. 35 million

Which of the following must be done to convert modified accrual basis to accrual basis?

D. All of the above Record capital assets Change expenditures for debt service principal to reduction of liabilities Make adjustments to revenues to convert to the accrual basis of revenue recognition

To qualify as a collection, a donated or purchased item must meet all of the following conditions except:

D. All of the above must be met. Held for public exhibition, education, or research to further public service Protected, keep unencumbered, cared for, and preserved. Subject to an organizational policy that requires the proceeds from sales of collection items to be used to acquire other collectibles.

When preparing government wide financial statements, the modified accrual based governmental funds are adjusted for which of the following events?

D. All of the above. Capital asset related events Long term debt related events Internal service fund activities

Which of the following items are added to government - wide financial statements through worksheet journal entries?

D. All of the above. General Fixed Assets General Long Term Debt Internal Service

If an internal service fund has positive operating income, the worksheet entry to add the internal service fund to governmental activities would be a:

D. Credit to Expenditures/Expense

A government reported an "other financing source" in the amount of $750,000 related to the sale of land in its governmental fund statement of revenues expenditures and changes in fund balances. The land had a cost of 275,000. The adjustment in the reconciliation when moving from the governmental funds statement of revenues expenditures and changes in fund balances to the change in net assets for governmental activities in the statement of activities would:

D. Decrease of $275,000

A government reported expenditures for infrastructure as follows: $20 million for improvements and additions, $18 million to extend the life of existing infrastructure $16 million for general repairs. The cost of its infrastructure, excluding land is $750 million and the infrastructure has an estimated life of 50 years on average. Which of the following would be reported expense ( in millions) under each of the following options?

D. Depreciation Approach $31 million; Modified Approach $34 million

For the depreciation of infrastructure...

D. Governments are permitted a choice to use the modified approach or to record depreciation int he same manner as other depreciable fixed assets

Where in the basic financial statements, in most cases, would one find internal service activities reported?

D. In the proprietary funds statements and in the governmental activities column of the government - wide statements

Which of the following is true regarding the government - wide Statement of Net Assets?

D. Neither of the above

A company has bonds outstanding at the beginning of the current year. The debit in the worksheet entry to bring these on to the books would be to:

D. Net Assets

When are the entities to covert modified - accrual statements to accrual statements posted in the individual fund general ledgers?

D. None of the above, they are not posted

A government incurred expenditures for its infrastructure as follows: 20 million for general repairs 21 to extend the life of existing infrastructure 22 million for improvements and additions If depreciated is to be charged, the amount would be 23 million. What of the following would be true?

D. None of the above.

Which of the following fund types is not included in the government - wide financial statements?

D. Pension Trust Fund

Which of the following would not be an adjustment for long term debt when preparing government wide financial statements?

D. Recording the cash received from a debt issue

When converting fund financial records to government- wide financial statements, worksheet entries are made to eliminate all of the following accounts except:

D. Wages Payable

Which of the following statements is not correct with respect to the year end adjustments for the government wide statements?

D. When preparing government wide statements, depreciation expense must be eliminated.